September Links: Picking Our Best Path

Posted by John Charles Kernodle on October 27, 2015  /   Posted in Monthly Links

It’s hard to believe that September is almost gone. School has started, football season is in full swing, and the days are getting shorter. This month’s links talk a little bit about money and a little bit about growing older.

Why More Seniors Are Forming Their Own ‘Villages’

As we get older, we face more questions about how to manage our day-to-day lives. We don’t want to be a burden on family and friends, but we also don’t want to give up the lives and routines we’re used to. A few years ago, I heard about the Beacon Hill Village. It and other groups like it support independent seniors as they get older. Using a membership fee, the village can provide a small staff to help them manage and stay in their homes longer. It’s a great concept that I think has a lot of potential in different communities.

How America Lost Track of Ben Franklin’s Definition of Success

When we say we’re successful, what do we mean? Do we speak solely about our professional accomplishments or do we include our personal lives, too? In today’s world, it’s not unusual to hear success connected to things like public popularity or visible wealth. But what if success is really about something else? What if, in the words of Benjamin Franklin, we really want people to say at our death, “You lived usefully.”

4 Reasons to Stop the S&P 500 Comparisons

We’ve probably compared our portfolio to the S&P 500 at least once. After all, the S&P is an index of U.S. stocks with a pretty steady history. But there’s a problem with this comparison. It’s not an apples-to-apples comparison. Other things like risk, liquidity, and correlation come into play. So while comparing might be fun — “Wow, I’m doing better than the S&P 500” — it’s not always meaningful.

How to Raise a Future Millionaire

We want our kids to succeed in life, but what should we be doing to help them get headed on the right path? I liked this article because it laid out some specific things we should be teaching kids to help them make smart money decisions. The suggestions probably won’t surprise you, but they’re a good reminder of the things we need to be teaching our kids when it comes to money.

Dos and don’ts to preserve your brainpower

It happens to the best of us — we get a little bit older every day. So I loved reading about the ways we can stay sharp and connected as we age. It’s simple stuff that all of us can do. Things like testing our ability to get places without GPS or protecting our hearing will have a bigger impact than you think on our ability to age well.

Your Big Advantage Over the Average Investor

Posted by John Charles Kernodle on October 27, 2015  /   Posted in Newsletter

Over the last few days, I suspect you were tempted to look at your investments. After all, you’re human, and it’s been a bit of a wild ride with the markets trying to decide where to settle. But here’s the thing. Even if you did peek, you know something that many other people don’t.

You know that your financial goals have very little to do with what’s happening in the market on any given day.

Instead of paying attention to the markets, you’re choosing to pay attention to your goals. Instead of trying to guess what the markets will do tomorrow, you’re focusing on the things within your control today.

That gives you a big advantage over the average investor.

Too many people put off dealing with their financial lives. They avoid looking at their retirement accounts. They ignore their credit card debt. They forget the power of compound interest.

I understand why. Even after spending years helping people with their money decisions, I can still see why it feels overwhelming. When I work with clients to help identify their goals, I’m asking questions that require thinking about their future selves. Who will you be in 10, 20, even 30 years?

These questions don’t always come with easy answers. But experience shows that asking these questions now can help people set financial goals they’ll actually stick with.

For instance, if you didn’t understand the true value of your assets and your debt, how will you ever know what you need to save to reach a future goal? And if you don’t know how much you need to save, then how can you know what investments best match your goals?

I know that thinking about money, let alone talking about it, can be a challenge for some people. But it’s so important to have these conversations and understand your true financial situation.

I love those moments as an advisor during a client meeting when I see people making the connection. After answering several questions and considering different options, they now know what goals matter most to them. They also know markets will go up AND down. But they have confidence that by sticking with their goals, they can feel confident about their ability to adapt as things change both in the world and in their lives.

Over the next few days, weeks, and probably months, there will continue to be headlines about what the markets are (or aren’t) doing. At times, the headlines will be really persuasive. If that happens, and you’re feeling tempted to react, I suggest reviewing your goals. Unless a particular headline happens to be one of your goals, stick with what you know will work in the long term.

I doubt very many people have set a goal to sell everything if the Chinese stock market takes a dip. However, based on what I’ve seen in the news the last few days, that’s how too many people are reacting. You know better, and with your financial goals in place, you can feel confident about the decisions you’re making for your financial future.

July Links: Summer Reads

Posted by John Charles Kernodle on October 27, 2015  /   Posted in Monthly Links

I hope you’re all having an amazing summer. This month, I wanted to share a few links to stories that caught my eye over the last few weeks. They cover a range of topics from impact investing to productivity. I think you’ll find them an enjoyable read on a summer afternoon.

When Impact Investing Stays Local

Many families have charitable giving plans, but you might be less familiar with the idea of monitoring the effect of that giving. Sometimes referred to as impact investing, people “measure what their dollars accomplish.” It seems like an obvious idea, but it hasn’t always been easy to collect data and figure out what kind of giving has the biggest impact. Now, families have more options, particularly at the local level, to help their communities and know exactly how their donations have helped.

Just Hearing Your Phone Buzz Hurts Your Productivity

We like to think that technology helps us get more done. In reality, it can end up distracting us from what we’re trying to do. Take the beeping and buzzing of our smartphones. These notifications seem convenient, even helpful. But just think about how quickly they distract us from what we were doing. Try turning off your notifications for one day and see what happens. I bet you get more done because you’re interrupted less.

Science Says You’ll Probably Regret Your Next Decision

We *think* we know ourselves pretty well. But what we think we know and the reality of what we know, don’t always match up very well. Case in point, we’re bad at predicting how a particular decision will make us feel. For instance, we predict a visit to the doctor or an announcement at work will make us feel really bad. But the outcome isn’t as bad as we thought. On the positive side, we convince ourselves that finishing off our dessert will feel so good — until we feel sick from eating too much. We can get better at making decisions, but we need to start by understanding we’re biased to overestimate and underestimate how we’ll really feel about different outcomes.

5 ways to keep your financial information safer from hackers

I know a lot of people worry about protecting their information online, particularly their financial information. This list of tips might already be a habit for you, but if you have a parent or friend who isn’t as savvy as you, I hope you’ll share these best practices. Simple steps now can prevent a big, financial headache later.

It’s official: Dimensional Fund Advisors to open East Coast HQ in Charlotte

I love that part of our team at Strathmore Capital Advisors gets to call Charlotte, North Carolina, home. From serving our clients to raising our families, there’s a lot that makes Charlotte a great place to be. It turns out that our friends at Dimensional Fund Advisors (DFA) agree with us. As you may remember, we work with DFA to build smart portfolios around expected returns. So we were really excited to learn that DFA plans to make Charlotte their East Cost headquarters. This move means great things for Charlotte, including over 300 jobs and $100 million invested in a new facility. DFA continues to be a valuable resource for Strathmore and our clients. We look forward to having them in the neighborhood.

June Links: Making Plans for the Future

Posted by John Charles Kernodle on October 27, 2015  /   Posted in Monthly Links

By sheer coincidence, most of June’s links ended up being about retirement. They cover different aspects of retirement and reflect just how many things we have to consider when we’re making plans for the future.

The Four Pillars of Retirement Savings

The financial news tends to talk a lot about how to invest our money. The talking heads say a lot less about how to save the money we need to invest. Saving money just isn’t as interesting as investing money, but in many respects it’s more important. Author and investor Charles Ellis identified four factors that will affect our total savings: earnings, age when saving starts, retirement age, and rate of return. Of those four, we only have total control over when we start saving. This might explain why the biggest financial regret for many people is failing to save money earlier in their lives.

What the Supreme Court’s fixes for retirement savings may do to your 401(k)

Many people rely on 401(k)s as a primary source of retirement income. In recent years, there’s been more discussion about the fees involved with these programs. In a recent Supreme Court decision, the justices ruled that “workers should have access to the best fee structures available for their retirement plan.” In other words, employers need to make sure that if two, comparable plans are available, the plan with the lower fee gets offered to employees. This sounds great … on paper. But if you happen to be a small business owner, these changes may have the unintended consequence of making 401(k)s too expensive to offer.

Living, and Dying, at Home

If asked, I suspect almost everyone would say they’d prefer to live in their homes for as long as possible. Unfortunately, our current system doesn’t do a great job of supporting this desire. That’s why I was thrilled to see this story about communities banding together to support each other as they age. Something as simple as providing a weekly car trip to the grocery store can help people stay in their homes longer. These groups also offered an ongoing social connection, which is so important for our mental health as we age.

Avoid the Recency Pitfall

How we see the world is driven in large part by what we’ve just experienced. This is particularly true when it comes to investing. For instance, we may hear of a “hot” stock that’s doing really well. We think to ourselves, “Now’s the perfect time to buy.” But we’re making an assumption that the stock will keep going up. It might, but it could just as easily take a dip right after you buy. That’s the problem with our recency bias. We think it’s telling us one thing, but it’s really just tempting us to chase after performance.

Will You Be Able to Work in Retirement?

Some of you may be counting down the days until you can retire. For others, you can’t imagine not working. You may worry about being bored, but for some people, they’re counting on retiring later to cover a savings shortfall. Whatever your plans, the data suggests we need to be cautious. We may not have the option to work after a certain point. A recent survey highlighted that 40 percent of people who retired earlier than planned did so for health reasons. On the bright side, however, the majority of middle-class retirees report working because they want to, not because they have to.

It’s Time to Have This Conversation

Posted by John Charles Kernodle on October 27, 2015  /   Posted in Newsletter

No one likes to think of the possibility that some day, easy tasks that we take for granted may prove beyond our ability. Things like the simple math we use to figure out a tip or balance our checkbook may become more difficult. I was surprised to learn that even the healthiest of brains can struggle with basic math and financial decisions as we get older.

The issue isn’t intelligence, but age. Once we hit 80, we all face a greater risk of some cognitive impairment. As a result, we’ll put at risk our financial success and well being if we don’t take steps early on to protect ourselves.


This issue is most definitely a part of the transition process I introduced in the March newsletter.  We have a choice, both as an older parent or as an aging child. We can take steps now to make use of financial tools that will protect us, like revocable living trusts, durable financial power of attorney, and health care directives.  Or, we can pretend this will never happen, and do nothing.

Clearly, I recommend everyone do the former. The reality is that as we age, we may continue to have good physical health. We may even continue to enjoy our daily crossword puzzle. But we need to recognize that age can make us more vulnerable to bad financial decisions.

You haven’t worked this hard and this long to build up your wealth for nothing. But protecting it may require admitting we’re human. Things will change, and one of those things is that we may need more direct help with our finances.

In the New York Times recently, reporter Tara Siegel Bernard shared the story of Francis Taylor:

At 80 years old, he married a woman 17 years his junior, who, over their three-year union, according to the family, cashed $40,000 in blank checks sent by his credit-card issuer and emptied the contents of his $123,000 annuity, leaving him with little more than a giant tax bill.

Luckily, the family learned what was happening before paperwork for a reverse mortgage could be submitted. Mr. Taylor still has the equity in his home.

But this situation represents the last thing I want to happen to any of you. In this instance, it was a second spouse, but it just as easily could have been a friend or another family member. The sooner we recognize our potential risk, the better we can lay the groundwork to have our affairs taken care of the way we want.

It may not happen today, but if you haven’t already done so, I suggest you set a date to finalize a transition plan. Have the conversation with everyone involved from friends and family to the professionals you work with. Make sure that everyone knows about everyone else so there’s a clear system of checks and balances in place.

I’m of the firm belief that when we reach the point where we need help, that help doesn’t have to be smothering or condescending. If we’ve taken the time to create a transition plan that fits us, that respects our desires, we can have confidence that all the hard work we’ve done over the years won’t be lost in our last years.

April Links: How to Get More Out of Life

Posted by John Charles Kernodle on April 01, 2015  /   Posted in Monthly Links

April’s links are all about you. How can you get more out of life? How might you be happier? What stories are really worth your attention?

The Anti-Bucket List
Most of us have a bucket list tucked away somewhere. But do these lists encourage us to focus on the wrong things instead of what’s right in front of us? As Leo Babauta writes, “Why put pressure on ourselves to achieve a huge list of things that aren’t that meaningful? Why feel guilty if we’re not pursuing them? Why not let them go? Life isn’t a big to-do list, nor is it about optimizing all the things we do in life.”

The Simple Secrets to Happiness
We don’t often think about it, but the little things we do every day add up and have a bigger impact than the things we do only once in a while. As a result, the habits we choose to form (or to break) may lead to greater happiness. Even better, these habits don’t need to be big changes for us to see the results.

Important Stories Worth Paying Attention To
I spend time telling you to ignore a lot of stories, but Morgan Housel from the Motley Fool pulled together a smart list of topics that are worth our attention. Even better, he puts these stories in context to help you understand why they’re important.

Someone is Always Outperforming Your Portfolio
It’s tempting to assume that if someone somewhere is doing better than us with their investments, we should make a change. But this assumption skips over what’s really important: our goals. If our financial plans are helping us meet our goals, why would we switch to someone else’s plan that doesn’t have anything to do with our goals?

Do You Have a Transition Plan?

Posted by John Charles Kernodle on March 01, 2015  /   Posted in Newsletter

Over the last few years, we’ve seen a growing trend of people caught between two sets of demands. On the one side, this group is focused on raising a family, building a career, and saving for retirement. But on the other side, this group is being asked to step in and help manage their parents’ affairs.

The situation has become common enough the group has earned a name, the Sandwich Generation. According to a 2013 Pew Research report, “around 42 percent of Gen Xers and 33 percent of baby boomers fit this profile.”

Even more concerning, a large number of “households are not prepared for retirement.” In 2014, the Federal Reserve conducted a survey that found “31 percent of non-retired respondents (including 19 percent of those aged 55 to 64) … don’t have any retirement savings or pension.”
Given those numbers, it’s not surprising that I’m hearing more often from clients about this issue and how they feel caught in the middle. The concerns vary, but they come back to a bigger question. How do we make this transition successfully?

Over the next few months, I’m going to share some best practices in this newsletter that specifically address this issue of transition. You may be the position of a parent needing more help from a child or a child being asked to do more for a parent.

Whatever your role, my goal is to help reduce the frustration and limit the guessing. These transition periods will happen for all us. And while we may be on one side at this point, there’s no reason to think we won’t end up on the other side … eventually.

Refusing to talk about the need for a transition plan remains a huge roadblock. No one likes to think about the day when roles will reverse. That said, these discussions are crucial. The sooner many of these issues can be addressed and planned for the better for everyone involved.
With that in mind, here are some of the specific situations I’ll address in future newsletters:

  • Establishing power of attorneys
  • Setting up estate plans
  • Creating and managing the transition plan

One of the most common scenarios I’m seeing is that people assume having the documentation (e.g., power of attorney) is enough. However, there’s yet to be a conversation about when and how things will transition. Stopping short of this conversation can create otherwise avoidable headaches. My goal is to save you from most, if not all, of those headaches.

We’re at an interesting moment in history. People are living longer. We’re having kids later. Sometimes those kids leave, then boomerang back. Some parents are discovering they may very well outlive their money. Whatever the situation, things have changed. My hope is that by the end of 2015 you’ll feel more confident about how to handle these changes.

November Links: How Do You Deal with Money?

Posted by John Charles Kernodle on November 01, 2014  /   Posted in Monthly Links

We’re getting close to the end of the year, and this month’s links focus on the more personal side of how we deal with money.

Why You Should Be a Risk-Taker, Morningstar
There are plenty of people who will suggest that it’s possible to get risk down to zero. We know better, but that doesn’t mean we aren’t tempted to test some of those “risk-free” investments that still promise big returns. You’ll enjoy this breakdown of risk and perhaps come away with a better understanding of what risk really means and why it’s not all bad.

“The point with risk is not to avoid it (because you can’t). But neither do you have to submit to it. The point with risk is to take it: Actively take it. Deliberately take it. Take it with purpose, in the right balance and for the right reasons.”

How the Story You Tell Yourself Can Make You Happier, Quartz
There’s a lot of debate about what we can do to make ourselves happier. Psychologist Shawn Achor suggests that it may be something simpler than where we live or where we work. According to Achor, “Happiness requires ‘changing the lens’ of how you perceive your reality.” The first step: tell yourself a positive story about your life. It’s simple, yes, but oddly very helpful. If you follow the link, you can watch a short video of Mr. Achor sharing his ideas as TEDx.

What Constitutes a Rich Life?, A Wealth of Common Sense
This short post is worth the quick, three-minute read. It reminded me that’s it’s very easy to focus on numbers and skip over why we’re doing what we’re doing.

“Having a high net worth and living a rich life are two completely different things.”

The Willpower Gene, The Atlantic
We like logical explanations for why we do things. So it wasn’t a huge surprise to see that scientists are questioning if our financial abilities are biological, and they found one – they think. The problem with this thinking is that it give people an excuse to not get better with their money:

“If you accept that an innate, or genetic predisposition to risk or to risk-aversion can explain individuals’ financial savings behavior,” Richman added, “then the fiction that financial security or wealth depends solely on genetic predisposition can be maintained.”

There will always be reasons to avoid doing potentially difficult things that are in our best interest. Genetics just happens to be the latest reason to keep putting off what we need to do.

Don’t Leave Money on the Table

Posted by John Charles Kernodle on October 07, 2014  /   Posted in Newsletter

It isn’t discussed much, but when markets take a drop, it sets up a choice for investors with long-term consequences. Investors can stick with their plans, which probably include holding on to stock and maybe even buying more. It can feel like a scary choice if the markets are jumping all over the place. However, the other option is to let emotion rule the day.

Maybe investors don’t have a plan, or they ignore it, and they sell all their stock holdings, convinced it’s better to get out now. After all, it’s much wiser to get what you can out of the markets before it all disappears.

I’ve heard people make both arguments. But when they make the latter one, they skip over something incredibly important: the compounding effect. As a result, the choice to sell all stocks at market lows can create a wealth gap that’s incredibly difficult to close.

One of the best examples has to be Dalbar’s rolling 20-year average return. From 1993-2013, the S&P 500 returned 9.22 percent. Remember that this number accounts for the down years after the tech bubble and the most recent recession. It’s a return almost everyone I know would consider acceptable, and all it required was investing in a S&P 500 fund in 1993 and then doing nothing. But that’s not what the average investor did.

Instead, the average investor jumped in at market highs and cashed out during market lows, which resulted in an average return of 5.02 percent. That’s a gap of 4.20 percent. I know of no investor that would be happy leaving that money on the table. Yet it can happen if we aren’t careful. Just remember the headlines from even a week or two ago. People who previously wondered if we’d ever see volatility again were now worried the market wouldn’t ever settle back down.

It a tough tightrope to walk as an investor, but to give you some context let’s walk through what all too many investors did back in 2007. It wasn’t unusual to hear that people were getting out of stocks and swearing to never buy them again. This decision came with a cost that the Wall Street Journal illustrated perfectly.

“Imagine two well-off households, each with $100,000 in the stock market in 2007. A family that sold in 2009 after losing half its portfolio’s value may now have $50,000 in a savings account. A family that held on would now have about $130,000 in stocks. The inequality has yawned merely because of the investing decisions. In the long run, those savings accounts have a vanishingly small chance of outperforming stocks.”

Besides the fact that we know markets go through cycles, we also know they compound wealth much more efficiently than savings accounts. If you’re lucky, you might find a savings account paying one percent. Compare that to the five-year S&P 500 average of 17.94 percent.

Over those five years, $50,000 in a savings account earning one percent would only be worth $52,551. That same $50,000 invested in an S&P 500 fund would have turned into $114,097. It’s incredibly difficult to recover from that kind of investing misstep, particularly since we understand that $114,097 will continue to compound faster than the $52,551 even if it’s immediately invested into stocks.

So the next time the markets start to dance around and the headlines try to convince you that another Black Friday is around the corner, remember these numbers and the potential cost of ignoring your plan. We’ve worked together to build a plan that takes market movement into account while still helping you get closer to your goals. By letting your plan do its job, you can avoid the classic investor mistake of buying high and selling low. It’s a choice that’s tripped up more than one investor, and it’s one mistake that’s entirely avoidable.

October Links: Don’t Be Scared It’s October

Posted by John Charles Kernodle on October 01, 2014  /   Posted in Monthly Links

This month’s links are a mix of both investing and personal finance stories. They should give you something more useful to read than all the stories suggesting investors should be “scared” it’s October again.

Nobel winner Fama: Active management ‘never’ good
“If active managers win, it has to be at the expense of other active managers. And when you add them all up, the returns of active managers have to be literally zero, before costs. Then after costs, it’s a big negative sign,” Fama added.

“I Have No Idea”
“Realizing the limits of your intelligence one of the most important skills in finance. P.J.O’Rourke described economics as “an entire scientific discipline of not knowing what you’re talking about,” which is pretty accurate. When you pretend you know something you don’t, your perception of risk becomes warped. You take risks you didn’t think existed. You face events you didn’t think could occur. Understanding what you don’t know, and what you can’t know, is way more important than the stuff you actually know.”

An Inside Look at Why We Love Short-term Habit Change
“It’s great to use a project to jump-start your actions, and to focus your attention, but it’s very important to think about how you’re changing habits for the long-term, not just making some temporary effort.”

More Money, More Problems? The Dangers of Lifestyle Inflation—and How to Avoid It
“Numerous studies support the notion that as incomes rise, so does the tendency to spend, not save. A Federal Reserve report found, for instance, that less than half of Americans earning between $75,000 and $99,999 saved any money whatsoever—and as many as 16% of those within that income bracket actually went into debt.”

The world’s greatest stock picker? Bet you sold Apple and Google a long time ago
“Let’s imagine for the moment that you are the World’s Greatest Stock Picker. … Can you imagine how much wealth you could create? I have some bad news for you, kiddos: Even if you had that superpower, it would be worth surprisingly little to you. The odds are that it would not create much wealth, and it might even cost you money. How could that be possible? The short answer is your brain.”

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